RBS to securitise Project Isobel in next two weeks

The securitisation of the £550m loan that Royal Bank of Scotland made against the £1.36bn nominally-valued Project Isobel portfolio is imminent.

Sources confirmed that the process of securitising the loan will complete in the next couple of weeks and that the deal has been rated.

However, it is unlikely that the bonds will be sold in the public market, at least initially. Instead, the bank will carry out pre-marketing to assess potential pricing. It will then decide whether to try to sell the bonds or to hold them.

The securitisation has been arranged by a group in the bank’s non-core real estate team led by managing director Rajesh Sivaraman.

Rory Cullinan, head of the non-core group, has stressed that RBS does not need to agree fire sales of assets. With Isobel the bank’s strategy was to structure both its equity and debt in the loan portfolio to be prepared as far as possible for sales at the best possible time.

It transferred the loans to a fund in which the bank has a 75% equity stake and Blackstone Group 25%. Blackstone acquired its 25%  at a c30% discount to nominal value.

When it proved impossible to source what RBS considered competitively priced “loan-on-loan” debt in the market, the bank made the three-year-term loan itself, at c 600 basis points over Libor.

Taking Blackstone’s discount as a guide to value, the loan to value of the £550m of debt is just under 60%.  The deal closed six months ago, in January.

Jane Roberts, editor

See the next issue of Real Estate Capital, out next Monday, 25 June, for a 10-page feature on new lenders and the structural changes in the real estate lending market.